Combined
heat and power (CHP)
is the generation of heat and electricity in a single production process. CHP
generates heat and power far more efficiently than traditional methods such as
power stations or on-site boilers. Cogeneration reduces stress on electric
grids, allowing industries to receive an uninterrupted power supply while
optimizing distributed power generation.
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Industry Eyeing CHP Systems for Their
Versatility in Heating and Cooling Applications
National governments have implemented
subsidies and policies that encourage cogeneration of power. CHP systems play a
key role in saving energy wasted in other thermal generation techniques. Wasted
heat from a cogeneration plant can be used in either heating or cooling
applications. Several industries are actively considering CHP systems for
electricity generation as it allows them to use both biomass and natural gas as
a fuel.
Environmentally-friendly and Lower Cost
Characteristics Popularize Natural Gas Segment
The natural gas segment is expected to lead the
combined heat & power market until 2025. Several commercial and residential
CHP applications rely on natural gas because of its lower environmental impact,
cost-effectiveness, and easy availability. Furthermore, natural gas plants can
work for longer periods of time with lower investments, allowing companies to
readily tweak their production capacity. The US, China, and Russia are the
largest users of CHP units in the combined heat and power market and express a
strong preference for natural gas powered ones.
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High Investment Cost During a Pandemic Makes
Organizations Reconsider CHP Systems
The three biggest challenges to overcome in
the combined heat and power market are high operational costs, CAPEX, and the issues
around COVID-19. CHP systems are expensive to install and maintain – nearly
twice that of conventional systems. Thus, the payback period is often
significantly longer. The operating cost of CHP systems is dependent on the
efficiency of the system, the fuel used, and the total electricity generated.
Business uncertainties are present in every industry, but especially so in the
combined heat & power market post COVID-19. If companies are unsure about
the long-term prospects of a CHP facility, they are unlikely to grant approval
for installation. The economic viability and size of CHP plants is contingent
on the demand for heat and electricity. If errors are made in the estimation
phase, the heat is unusable and it could have a cascading effect on the CHP
project.
Climate Conditions in Europe Favour Maximum
Installation of CHP Systems
Europe has the maximum installed capacity in
the global combined heat and power market but APAC is predicted to record
higher growth during the assessment period. Government-driven industrial
ventures are anticipated to be the main drivers in both regions. For e.g. – the
governments of Denmark and Germany provide tax incentives to organizations
relying on cogeneration equipment. Colder weather conditions in European
nations such as Finland, Sweden, and the UK are likely to fuel demand for
cogeneration equipment in both thermal and electrical applications. In 2020, the
Kazakh-Romanian Energy Investment Fund signed a contract with Calik Enerji to
build a cogeneration plant that should commissioned in early 2023.
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